Five retail stocks worth considering for your Christmas list

With a bumper festive shopping season tipped in the weeks ahead, it’s worth picking up some store stocks for yourself and popping them into your portfolio. See what’s hot.

It’s the most wonderful time of the year … as the song goes, and traditionally it is true for retailers with Christmas their busiest time of the year. And despite rising inflation and interest rates, signs are positive for a bumper 2022 festive season.

So instead of buying presents at a store, investors can consider gifting themselves a slice of the store in their portfolio by investing in stocks expected to do well in the retail sector.

BetaShares senior investment strategist Cameron Gleeson says global retail sales have stayed somewhat resilient despite rising cost-of-living pressures.

STATE OF RETAIL

Consumer Discretionary has been one of the worst performing global equity sectors in 2022, yet may be due for a bounce if December quarter consumer spending is on the upside.

“So far, retail sales have been supported by excess savings buffers built up by consumers during the Covid-19 pandemic, as well as very low unemployment,” Gleeson says.

“However, we might be starting to reach a turning point as interest rate increases start to bite.”

While the most recent retail sales data in Australia was down 0.2 per cent over the month of October, it is up 12.5 per cent from the previous October and the same figures remain strong in the US.

Looking ahead, Australian retail sales are set to crack $60bn for the first time this festive season, despite cost-of-living challenges.

The National Retail Association (NRA) forecasts Aussies to spend $60.6bn in the pre and post-Christmas sales period (November 14 to December 31), which is up 3.9 per cent on last year.

Shoppers Molly and her mum Gabby in Bourke Street Mall, Melbourne. Picture: Jake Nowakowski

The NRA 2022 Consumer Sentiment Report, prepared with the Retail Doctor Group, found 71 per cent of consumers had changed their spending behaviour because of rising costs. The report noted purchasing decisions during the festive sales events would be driven largely by discounts and offers available.

NRA deputy chief executive Lindsay Carroll says Australian consumers were prepared to cut back on their day-to-day spending to splurge on special events such as Christmas, which shows that people still want those great experiences.

“What this means for retailers is that there are consumers out there ready to spend money, but more than ever they are wanting bargains, great shopping experiences and smooth transactions,” she says.

Gleeson says while the RBA’s efforts to slow the economy are starting to have an impact on retail sales, the full impact is unlikely to be seen in earnest until next year.

INVESTING

“Investors can use ETFs to obtain convenient, transparent and cost-effective exposure to international markets,” Gleeson says.

“Our IBUY offers pureplay exposure to online retail companies listed around the globe, including in the US, China, and Argentina.

“For many investors it may make sense to invest in an ETF to get exposure to a portfolio of local and international companies that stand to benefit from people buying from leading online marketplaces.”

Myer is one of the stocks to watch for your Christmas stocking.

FIVE STOCKS TO GIFT WRAP

Datt Capital founder and managing director Emanuel Datt says these retail stocks may be worth putting in your 2022 Christmas sack.

Dusk (ASX: DSK)

Datt says the homewares and candle retailer has prospered over the past two years. “Tactile homewares are a resilient sub-niche in discretionary retail, and we believe the company can continue to expand its operations,” he says.

Lovisa (ASX: LOV)

“Costume jewellery is a cheap and cheerful category which we expect will remain stable even in times
of economic contraction,” Datt
says. “The stock is priced accordingly.”

The Reject Shop (ASX: TRS)

“The discount variety chain has had its challenges over the years but appears to have found a sensible path to sustainable profitability after right sizing its store network and a shift towards consumer staples providing some diversity in its revenue streams,” he says.

Myer (ASX: MYR)

Datt says the department store has had to adjust to a large shift in consumer behaviour but should see the benefit of restructuring its floorspaces and retailing expertise of major shareholder Solomon Lew’s Premier Investments.

Wesfarmers (ASX: WES)

“Whilst Wesfarmers isn’t strictly a retail business, Bunnings is the flagship of the conglomerate and tends to capture a disproportionate share of consumer revenues and profits in its niche,” he says.

* Nadine McGrath is a journalist for Stockhead, a free, journalistic news service dedicated to covering the stories of emerging ASX-listed companies. Visit stockhead.com.au

Originally published as Five retail stocks worth considering for your Christmas list